Good morning, Quartz readers!
The US has opened its financial crisis playbook in response to the coronavirus pandemic. Federal Reserve rate cuts? Check. Easy access to credit facilities? Check. Bailing out hard-hit industries? Well, let’s run that one back.
Airlines are in trouble as global transportation grinds to a halt. Hotel and restaurant chains face nearly existential crises due to social distancing measures. How and when should the government rescue them?
The response to the 2008 financial crisis featured two major bailouts. One helped banks, the other automakers. The failure of such companies, lawmakers reasoned, would spread through entire systems.
By contrast, “there is no systemic risk from bankruptcies in airlines or hotel chains,” says Adam Posen, president of the Peterson Institute for International Economics. “[With] the airline industry, we should only be concerned…with respect to their employees and their contractors, not their shareholders, or their planes, or their management. There is overcapacity in this industry.”
If airlines go bankrupt, they can fly limited routes in receivership, but rescuing them with public money won’t put passengers back in seats.
A trickier question is Boeing’s plea for $60 billion for the aerospace manufacturing industry. The airline maker was in crisis before the pandemic, working to return the 737 Max to service. But as airlines shut down, Boeing is losing its most important customers.
Like the automakers, Boeing is at the heart of a web of smaller companies that supply it with components. Lawmakers will want to protect it—but they don’t need to save the shareholders, or a management team that’s troubled by far more than Covid-19.
Indeed, senator Elizabeth Warren, who led oversight of the financial crisis bailouts, says any new bailouts must include restrictions on dividends and stock buybacks, as well as a $15-an-hour wage, personal liability for CEOs whose companies break laws, and board seats for worker representatives.
“This crisis arguably is going to hit the lower-income people even more disproportionately than 2008-9,” Posen says. “It’s all the more important that any bailouts be properly targeted. Bailouts are different from cash checks from the government—you can make them as conditional as you like.” —Tim Fernholz
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Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, work-from-home tips, and cherry blossom pics to hi@qz.com. Get the most out of Quartz by downloading our app and becoming a member. Today’s Weekend Brief was brought to you by Steve Mollman and Kira Bindrim.